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Income inequality and willingness to pay for environmental public goods
Affiliation:1. Department of Environment and Natural Resources, University of Freiburg, Germany;2. Department of Sustainability Sciences and Department of Economics, Leuphana University of Lüneburg, Germany;3. Department of Economics, University of Kiel, Germany;4. Department of Geography and Environment, London School of Economics and Political Science, UK;5. University of Tübingen, Germany;6. Department of Economics, University of Oldenburg, Germany;7. Resource Economics Group, Humboldt-Universität zu Berlin, Germany;1. University of Oldenburg, Department of Economics and Law, 26111 Oldenburg, Germany;2. University of Vienna, Faculty of Business, Economics and Statistics, Oskar Morgenstern Platz 1, Room 4.635, 1090 Wien, Austria;1. Institute of Environmental Systems Research, School of Mathematics/Computer Science, Osnabrück University, Barbarastr. 12, 49069 Osnabrück, Germany;2. Institute for Chemistry and Biology of the Marine Environment, Theoretical Physics/Complex Systems, Carl von Ossietzky University Oldenburg, Carl von Ossietzky Str. 9–11, 26111 Oldenburg, Germany;1. Department of Economics and Institute of Sustainability and the Environment, Western Michigan University, Kalamazoo, MI 49008-5330, United States;2. Department of Agricultural, Food, and Resource Economics, Michigan State University, East Lansing, MI 48824, United States;1. Department of Marine Sciences, University of Connecticut, 1080 Shennecosset Road, Groton, CT 06340, USA;2. Institute for Chemistry and Biology of the Marine Environment-Terramare, Carl von Ossietzky University of Oldenburg, Schleusenstraße 1, 26382 Wilhelmshaven, Germany;1. Research Center for Oceanography, Indonesian Institute of Sciences, Jl. Pasir Putih I, Ancol Timur, Jakarta 14430, Indonesia;2. Department of Chemistry, Faculty of Mathematics and Natural Sciences, Universitas Gadjah Mada, Sekip Utara, Yogyakarta 55281, Indonesia
Abstract:We study how the distribution of income among members of society, and income inequality in particular, affects social willingness to pay (WTP) for environmental public goods. We find that social WTP for environmental goods decreases (increases) with income inequality if and only if environmental goods and manufactured goods are substitutes (complements). We derive adjustment factors for benefit transfer to control for differences in income distributions between a study site and a policy site. For illustration, we quantify how social WTP for environmental public goods depends on the respective income distributions for empirical case studies in Sweden and the World at large. We find that the adjustment for income inequality can be substantial.
Keywords:Environmental goods  Public goods  Income distribution  Inequality  Willingness to pay  Benefit transfer  Sustainability policy
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